Max Murphey, a cash basis taxpayer, borrowed $10,000 from a bank for a business loan on August 1, to be repaid one year later. fte interest for one year at 6 percent was deducted from the loan proceeds in advance. His interest deduction for the current year is:

Question

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the re is no interest deduction allowed for the year because interest deducted from the loan proceeds is not considered prepaid interest. the cash basis taxpayer must pay interest to be allowed the deduction.

Max Murphey, a Cash Basis Taxpayer, Borrowed $10,000 from a Bank